Oct 17 (Reuters) -ICE cotton futures fell more than 2% on Tuesday as concerns over demand from top consumer China weighed on the natural fiber.

* Cotton contract for December CTZ3 was down 1.99 cents, or 2.3%, at 83.16 cents per lb by 1:04 p.m. ET (1704 GMT).

* "The U.S. is selling some cotton and the mills are fixing but to say that we are competitive in the world is not correct," said Louis Barbera, partner and analyst at VLM Commodities.

* U.S. cotton prices are unlikely to gain much traction this year despite lesser output as trade tensions push key buyer China to rivals Brazil and Australia, analysts said.

* The U.S. Agriculture Department (USDA) in a weekly crop progress report on Monday said 30% of the cotton crop was in good to excellent condition, compared with 32% last week.

* "It is harvest season and strong progress has thus far been made. Harvest weather remains almost excellent with no tropical threats on the map," Louis Rose of Tennessee-based Rose Commodity Group wrote in a note.

* In the grain market, wheat eased further and corn inched down as traders monitored the U.S. harvest progress. GRA/

* Oil prices edged higher ahead of a trip by U.S. President Joe Biden to the Middle East that is likely to involve balancing support for Israel with trying to prevent any regional escalation of its war with Hamas.

* Higher oil prices make polyester, a cotton substitute, more expensive. 

Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Shilpi Majumdar